Investing in Silver Now is a Steal

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Lately there has been quite a divergence in the behavior of those investing in silver compared to those holding gold.

One group is running scared, while the other is calmly stocking up.

It looks as if many of the weak hands holding gold in the form of exchange-traded funds (ETFs) are giving up and liquidating their positions. A record $4.1 billion was yanked out of gold ETFs in the month of February, a record high, according to the BlackRock ETP Landscape report. This figure was almost double the previous record set in January 2011 of $2.6 billion.

But it is quite a different story in the silver market, according to South Africa's Standard Bank. For the week ended March 1, silver ETFs added nearly 68 metric tons to their position. That brought the total silver held within 110 metric tons of an all-time record high.

That compares to 59 metric tons of gold being liquidated from gold ETFs in that same time frame.

Demand for Silver Eagle coins from the U.S. Mint also continues apace. February sales did not match January's record rate, but were still a very robust 3,368,500 ounces.

So, why is investing in silver becoming the favored trend?

The answer is simple: Silver is cheap.

Investing in Silver: Big Deal

While gold is roughly double its nominal high of $850 in January 1980, silver is still barely half its nominal high of around $50 an ounce set in 1980 and April 2011.

That makes the white metal affordable for the average investor looking to protect the value of his or her money.

French investment bank Societe Generale issued a research report March 4 stating that investors who want to put money into precious metals may increasingly turn to silver as the "cheaper alternative" to gold.

According to some analysts, silver is not only cheap on a nominal basis but also from a valuation standpoint.

James Carrillo, senior portfolio advisor for precious metals investment firm Swiss America Trading, told MarketWatch "Silver is grossly oversold at current levels, more so than any time in the past five years."

He added that due to strong physical demand, "silver should be rising."

Bear in mind too that silver has more industrial uses than gold. About 53% of silver is used in industrial products, according to the Silver Institute in Washington. Any semblance of a global economic recovery will further boost demand for silver.

"People have been buying silver both as a base and precious metal," Rohit Savant, a senior commodity analyst at the New York-based research company, told Bloomberg News. "Economic demand will push prices higher."

And the SocGen report pointed to another development that could make silver's fundamental outlook more positive than gold's…

The report highlighted the fact that measurable silver investment so far in 2013 is up more than 30%. If this pace continues throughout the year, SocGen says that this year's supposed silver surplus will quickly turn into a silver deficit.

That's why we asked Money Morning Executive Editor William Patalon III to explain if investors should diversify their holdings. His answer: buy silver coins. He says there are three ways to buy silver coins: the right way, the wrong way and the intriguing way.Go here to ensure you avoid the wrong one.

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  1. walter mitchell | March 22, 2013

    Buy as much as you want/can. Have your Mom do the same. Maybe you can have Stef do the same.

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